Over the last half decade or so, hardly any stocks have outperformed the market to the extent Advanced Micro Devices (AMD) has. The huge market gains have been a reflection of the company’s real-world performance, which has seen the chipmaker considerably close the gap on its traditionally much bigger rival Intel (INTC).
Apart from offering superior products, AMD has made the most of Intel’s production delays to eat away at its CPU dominance. However, 2021 is shaping up to be a different year to recent ones. Intel has been taking meaningful steps to turn its business around, and only recently appointed a new CEO, and one with proper pedigree at that.
Deutsche Bank analyst Ross Seymore notes how the new figure at the rival’s helm, could impact AMD’s forward charge.
“While we expect AMD to continue to execute on its new product ramps, and any changes to INTC’s manufacturing strategy will not impact competitive intensity for at least 2-3 years, we do expect this topic to increasingly weigh on the LT AMD thesis,” the 5-star analyst noted. “Consequently, despite increasing our revenue estimates in the near term (higher semi-custom + PC CPU revenue, with EPS slightly falling due to a higher tax rate in 2021), we expect the increased uncertainty around competitive intensity to weigh on AMD’s already premium valuation.”
While Seymore tempers expectations of future performance, he expects AMD to beat the estimates when the company reports 4Q20 earnings early next month (Feb 2.).
Seymore expects AMD to deliver revenue of $3.06 billion, a 9% quarter-over-quarter uptick, near the high end of AMD’s guidance and above the $3.02 billion consensus estimate. While on the bottom line, Seymore anticipates EPS of $0.48, above his previous forecast of $0.47.
Looking further ahead, while Seymore says AMD might be at risk of losing market share to Intel over the long term, “given positive data points in the gaming ecosystem,” the analyst raised his 1Q21 revenue estimate from $2.76 billion to $2.84 billion (Street expects to $2.70 billion).
That said, for now, Seymore expects AMD shares to stay range bound. The analyst rates the stock a Hold, along with a $90 price target. (To watch Seymore’s track record, click here)
Where does the rest of the Street side on this chip player? AMD maintains a Moderate Buy from the analyst consensus, based on 23 recent ratings. These include 15 Buys, 6 Holds, and 2 Sells. Shares are trading at $89.45, and the $96.55 average price target suggests room for about 8% upside. (See AMD stock analysis on TipRanks)
To find good ideas for chip stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.